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Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

October 16, 2013

Corporations Now Using Foreign Tribunals to Attack Domestic Court Rulings

Should an international tribunal of three private attorneys,
sitting outside of any domestic legal system, have the power to overrule domestic
courts?

That’s the question addressed in the recent analysis, “Investment
Agreements versus the Rule of Law?,”
published on UNCTAD’s Investment Policy Hub by Todd Tucker, Gates Scholar at
the University of Cambridge’s Centre of Development Studies. The piece highlights the little-known but creeping
practice of corporations asking foreign tribunals to second-guess domestic
court decisions not in their favor and to order taxpayer payment as
compensation.

These tribunals are the product of the “investor-state” system, a
little-known creation of “trade” and investment deals that empowers foreign
corporations to skirt domestic courts and directly challenge governments before
extrajudicial tribunals for policies and decisions that they claim as
undermining “future expected profits.” Under
this extreme system, foreign
corporations have challenged toxics bans, land-use rules, regulatory
permits, water and timber policies, medicine patent policies, pollution clean
ups, climate and energy laws, and other public interest polices.

As if undermining a government’s public interest laws and
regulations was not enough, foreign investors are increasingly using the
investor-state system to challenge court judgments, undermining the principles
of legal certainty, state sovereignty, and rule of law more generally. While domestic courts often employ safeguards,
such as the principle of judicial review, judicial independence and transparency
in their decision-making, these safeguards
are notably absent in investor-state arbitrations, where lawyers who
represent the investors take turns as ostensibly “impartial” arbitrators, interpretations
of international law are regularly inconsistent and erroneous, and decisions
often cannot be appealed.

In his compelling piece, Mr. Tucker cites examples from three
investor-state case decisions issued in the last several years, Mr. Franck Charles Arif v. Republic of
Moldovaand two iterations ofChevron v. Ecuador, in which the tribunals found Moldova’s
and Ecuador’s domestic court decisions to be in violation of these countries’ obligations
to foreign investors under Bilateral Investment Treaties (BITs).

In the Moldovan case, Moldovan airport officials gave Franck
Arif, a French national, an exclusive concession to operate tax-free shops at
an airport. When his competitors
challenged this in court, Moldovan courts found that the non-competitive concession
was illegal. In response, Franck Arif launched
an investor-state case against Moldova under the France-Moldova BIT, arguing
that the courts’ ruling violated the “fair
and equitable treatment” provision in the
BIT – the vague obligation that inventive tribunals have interpreted as corporations’
“right” to
a legal framework that conforms to their “expectations.” The tribunal first
conceded that the Moldovan courts had “…applied
Moldovan law legitimately and in good faith in the proceedings commenced by
Claimant’s competitors.” Nevertheless, the tribunal still decided that the
Moldovan courts’ rulings conflicted with the airport officials’ granting of the
non-competitive concession, and therefore constituted a violation of the vague
“fair and equitable treatment” obligation as a “breach” of Mr. Arif’s
“expectations.”

This dangerous trend of private three-person tribunals assuming
the authority to contravene domestic court decisions at the behest of
multinational corporations should raise the ire of those who support the
independence of courts, the sovereignty of nations, the rule of law, or even
the core democratic notion that a system of legal decision-making should be
accountable to those who will live with the decisions. Now the Trans-Atlantic
Free Trade Agreement (TAFTA) and the Trans-Pacific
Partnership (TPP) threaten to expand the investor-state system across two
oceans, subjecting domestic court decisions to a new wave of second-guessing by
unaccountable tribunals. Now is the time to halt the advance of this
extreme system – to restore the authority of our courts and the principles
of our democracy.

Comments

There is no such thing as a free lunch. There is no such thing as a Free Trade Agreement. Everything comes with a price. The price of Free Trade is not borne by the wealthy. It is borne by the ordinary people who lose heir livelihoods.